Summers Says ‘More Dangerous World’ Requires an FDR-Like Pivot

(Bloomberg) -- Former Treasury Secretary Lawrence Summers urged President Joe Biden to ditch the “usual laundry list of policy proposals” in his State of the Union speech, in favor of a pivot toward grappling with a global environment dramatically altered by Russia's invasion of Ukraine and its tightening links with China.

In the same way that President Franklin D. Roosevelt pivoted from battling the Great Depression to winning World War II, Biden “needs to shift from being the ‘protect the middle class from the pandemic' president to being ‘prepare America for the struggle ahead' president,” Summers told Bloomberg Television's “Wall Street Week” with David Westin on Friday. He said he was hoping for a “real change in tone.”

“We are looking at an event of potentially vast significance and concern,” Summers said in a follow-up interview Monday, referring to the Russian invasion of Ukraine and the tightening alignment of Russia with China. “Our ability to meet these challenges depends on recognizing them for what they are.”

Biden will need to rally Americans in a great campaign to support the principles of democracy in face of authoritarian threats, said Summers, a paid contributor to Bloomberg Television and a Harvard University professor.

The president delivers his address at 9 p.m. Washington time on Tuesday.

National Endeavor

“The United States faces far graver challenges to its security than anyone would have thought likely even several years ago,” Summers said. “That needs to have ramifications for almost every aspect of our national life.”

Summers, also a former director of the White House National Economic Council, likened the importance of the tightening bonds between Moscow and Beijing today to the realignment of China toward the U.S. that President Richard Nixon achieved in 1972.

American corporate leaders are among those that may need to rethink their approaches in the new environment, he said. “Anyone who thinks that is not a challenge to their ability to flourish and profit as a business is making an enormous mistake.”

“There was a tendency for some CEOs to treat the United States as a kind of primitive loyalty, but to emphasize that they had to do what was best for their company -- which could mean going anywhere and doing anything” in operations around the world, he said Monday.

Corporate Responsibility

While not advocating “hard and fast rules” for U.S. companies' engagement with China, Summers said too much effort has been spent by policy makers on American corporate interests in that country. Washington in the meantime “underinvested” in U.S. technological competitiveness.

“When we see the dominant emphasis in the economic policies of many countries shift from international integration to self-reliance as a dominant economic value, we know we are headed into a much more dangerous world,” he also said.

Summers urged Biden to put “more emphasis on our stake in what's happening globally” with regard to challenges ranging from resisting aggression, confronting the pandemic and addressing semiconductor shortages to safeguarding the dollar's status as the world's reserve currency by moving to contain inflation.

“We are going to need to spend more on national defense and more on global security -- in terms of not just military threats, but threats from climate change and threats from pandemics,” he said.

With regard to Russia, Summers advocated moves to spur an exodus of capital from the country, in addition to the sanctions already put in place.

“It's in our interest to facilitate capital flight” from Russia, he said. “Our strategy needs to give weight to facilitating the exit of elites from Russia” who are prepared to renounce their Russian citizenship and relocate their funds, Summers said, noting benefits to the U.S. from emigration from Germany in the 1930s.